Thread by @RanierGrant

We need to talk about what DeFi's aims at financial engineering are, and what it is actually perceived as.
DeFi is perceived both by it's developers and by Tradfi and the Fed as a competition with regulated brokers and registered products, as regulatory evasion.

I would strongly counter against this and argue that the real purpose and utility of DeFi is to be a direct competitor with Prime Brokerages and Financial Institutions in and of themselves, to expose them to public transparency, and give access to retail & emerging markets.

The deliberate intent to not only evade licensing and registration, but to extend exotic alpha products, like derivatives, leverage, new tokens, exotic yield, lending, and exotic instruments, directly to anyone, without requiring intermediary, pedigree, licensing, or banks.

This is the point and the intent of DeFi a deliberate critique of broken Western laws around securities and derivatives. Only Financial Institutions run by well, de facto oligarchy and privileged incumbent are allowed under the SEC & CFTC to access & trade non registered product

This of course is the point of the crypto industry, to give everyone access, because by the time a product makes it to a registered exchange, you're receiving tertiary beta profits, if anything, and being abused by Spac and IPO models, the FDV model. San Fran & Silicon Valley

have perfected the art of gate keeping and building regulatory moats around the offering of a public company, and the art of dumping on retail with predatory venture capital tactics, which FTX & SBF did to an extreme degree. FTT as a token mirrored this model. Solana did too.

(only solana's tech redeems it). Plus, ultimately it was indeed the Prime Brokerages that caused 2008, it absolutely was bad debt and over the counter exotic instruments without central clearing that did it, and there were smaller shops back then. Dodd Frank was an attack

on small firms and retail, to bail out and exhonerate the big banks and to further entrench their regulatory moats, with complex legal loop holes for Family Office and Hedge Fund to do well, whatever they want, anywhere in the world, while everyone else is sued by the CFTC/SEC

So while the SEC/CFTC indict, extradite, hunt, intimidate, and legally threaten non US DeFi teams, with the de facto position of "everyone is american until proven otherwise, we need global kyc", the Big Banks like Goldman get a free loophole under Volcker & Dodd Frank

The Prime Brokerages get a free loophole, because the laws were not written for international free trade, they were written for Incumbent Institutions to engage in highly selective, predatory protectionist, mercantilist foreign arbitrage. They gated the financial world.

Now on to what Prime Brokerages do, well they don't do DeFi and they don't do things transparently, they do all the bad things that got them regulated under Dodd Frank in the first place, and now Genesis is caught up in it, because alameda and SBF did things OTC & Opaque.

Now while DeFi may indeed have special ways to make risk transparent, to fulfill counterparty requirements, and instant settlement, and it may be unfairly regulated, it is missing critical components of Prime Brokerages & Central clearing, and this did cause the bear market

Though arguably it was central acter, prime broker adjacent behavior done through loopholes in Dodd Frank and loopholes in crypto regulation that allowed Three arrows capital and FTX to blow up, the contagion started with Terra, which absolutely was a failure of defi.

So let me explain what we need to fix defi.
1) Lenders of last resort
2) inter-dealer networks, inter protocol liquidity channels
3) interbank functions with stable interest rate onchain (very hard engineering)
4) CeFi Clearing House needs api to read onchain risk metric

5) CeFi CeDex (automated finance) to act as a potential buyer, i.e, using CeDex's access to clearing house liquidity to buy really exposed risk from treasuries on real DeFi
6) Real world asset tokens tied to CeDex's in non Western jurisdiction, because you need conservative col

collateral. You can't undercollateralize 6 chains of yield farming and lending with hyper illiquid ponzi vaporware that has a vol of 80. DeFi was and is undercollateralized and sensitive to reflexivity attacks & legal attacks from the big financial institutions.

Liquidity, liquidity, liquidity.
DeFi fixes most of the issues with OTC markets and hidden books. But not if the treasury run dry and the liquidity between chains is fragmented, and the collateral in the treasuries is vaporware. That's what got all this into a Death Spiral.

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